Homeowners that generate their own electricity from renewable or low carbon sources such as solar PV panels can receive regular payments from energy suppliers under the new Clean Energy Cash Back scheme, also known as Feed-in Tariffs (FITs).

The scheme, announced back in February by former Energy and Climate Change Secretary Ed Miliband, means any property owner with a renewable energy installation is entitled to claim payment for the electricity they produce, even if they use the energy themselves.

The Feed in Tariff is the main incentive scheme available to those looking to invest in solar technology after the closure of the Low Carbon Buildings Programme (LCBP) grants on 24 May. Existing applications for an LCBP grant before 24 May will be processed and more incentives are expected to be launched by the new coalition government to push households in the direction of renewables. The Renewable Heat Incentive (RHI) is due to launch in Spring 2014 and like the Clean Energy Cash Back scheme, will provide homeowners with fixed payments for the amount of heat they generate themselves using technology such as solar thermal water heating panels.

According to the Department of Energy and Climate Change, new financial incentives are due to be launched to meet carbon reduction targets. The department says: ‘The Government is committed to meeting the UK’s share of the EU renewable target and to reducing carbon emissions to meet our 2050 targets. Both targets will require developing renewable heat and decarbonising the heating sector. The Government will be considering further the role that financial incentives can play in helping us to meet our renewable and carbon targets.’

So what incentives are currently on offer for solar energy?

The latest scheme launched in April 2010 is the Clean Energy Cash Back scheme also known as the Feed-in Tariff (FIT). It’s an incentive for energy producers to move away from fossil fuels to renewable energy sources. It is a government legislation which guarantees a fixed, premium rate for renewable energy that is fed into the national grid. The power companies are obliged by the government legislation to pay for the renewable electricity, the additional costs of which are passed on to the customer.

What are the benefits of FiTs?

The benefits of the scheme are three fold. If you do qualify for the scheme you receive an initial payment for every kilowatt hour generated (Generation tariff) and an additional payment for every kWh you export to the grid (Export tariff). And there is also an additional Avoided cost benefit for usage of electricity onsite as it will reduce your bills.

The tariffs will cover anaerobic digestion, hydro and wind power as well as solar PV and aims to provide a five to eight per cent return on initial investment in Microgeneration technology. The payment will span for 20 years. A number of micro-combined heat and power (microCHP) installations also qualify for the feed-in tariffs with payment for 10 years.

Electricity and gas regulator for the UK, Ofgem, will manage the tariff but it is up to the electricity supplier to pay for the generation tariff.

How much money could I receive?

The amount of money you can receive depends solely on the size of the system; the amount of electricity you generate, and how you generate it. For example, if you fit an average-sized 2.5kW photovoltaic solar panel system you will be initially paid 13.39p per kWh generated; same if the system’s installed on a new-build home. The current tariff rates apply from 1 April 2014 for systems up to 4kW.

In addition to that fee you will also receive an added 4.85p for every kWh exported back to the grid. And to make it even more appealing, the income you receive is completely tax-free.

It’s worth noting that new domestic energy efficiency requirements were introduced in April 2012. If a domestic property does not meet these energy efficiency requirements, the Solar PV installation may receive just 6.16p/kWh.

How do I apply for a FiT?

Once you’ve decided which technology is best suited to you and your home, you must have the installation undertaken by an MCS certified installer using MCS certified products. When installation is complete, your installer will register you on the central FIT database and you’ll receive a certificate confirming FIT compliance.

Once you’ve received your certificate, you must then inform your chosen energy supplier that you’re eligible to receive the tariff by using your certificate as proof which the supplier can then cross-reference with your installation through the central FIT database.

It is then up to you and the supplier to agree payment intervals – a supplier may require meter readings (like gas and electricity readings) so ensure you have an additional electricity meter fitting to measure how much electricity is being fed back into the grid.

What about the Renewable Heat Incentive?

The domestic RHI is due to be introduced in Spring 2014.

The incentive works in three steps. Firstly, you need to install a renewable heat system in your property, such as solar water heating panels, that are recommended under the scheme. Once installed you can get an estimate about how much heat your renewable system will produce and, based on that estimate, you get paid a fixed amount for generating your own heating.

On 12 July 2013 the Government published the scheme’s tariffs, which revealed the level of support available to domestic householders to be a minimum 19.51p/kWh.

What about future incentives for renewable energy?

The new coalition government has promised a new raft of green initiatives that will see big changes to the country’s housing stock to allow more households to invest in renewable energy installations like solar panels.

David Cameron and the new government envisioned a green investment bank that would loan individual households the money to invest in carbon-reducing measures – a scheme called ‘pay-as-you-save’. The idea is that the household would pay the loan back using money saved through lower energy bills that would occur through having renewable technology installed. The vision has now become a reality with the launch of the Green Deal in January 2013.

(Please note: The Department of Energy and Climate Change (DECC) has announced that they have pulled the funding for the Green Deal. More information about this announcement, which was made on 23 July 2015, can be found here.)

The Government's Feed-In Tariff was launched on April 1st 2010 to encourage homeowners to generate their own electricity - it is split into two methods of revenue.

The Generation Tariff earns you a fixed income for every kilowatt hour of electricity you generate. And, The Export Tariff earns you income for every kilowatt hour you generate and sell back to the grid.

An average 3/4 bedroom house fitted with 2.5kw Solar PV panels and normal electricity usage would earn over £850 p/a tax free!

Add this to an approximate £145 reduction in your electricity usage and you could benefit by over £1,000 per year.